On 26 June 2026, the Competition Commission of South Africa (Commission) issued the attached draft terms of reference for a market inquiry into the franchise sector in South Africa. We are writing to you to explore whether any of your clients may be impacted by the Commission's market inquiry.

What is a market inquiry under South African Competition Law?

We are aware that market inquiries of this kind may not have a direct equivalent in all jurisdictions and therefore set out below a short explanation of what a “market inquiry” means.

A market inquiry is a formal investigative tool available to the Commission in terms of the Competition Act 89 of 1998, as amended (the Act). It is defined in the Act as "a formal inquiry in respect of the general state of competition, the levels of concentration in and structure of a market for particular goods or services, without necessarily referring to the conduct or activities of any particular named firm." Importantly, unlike complaint-based investigations that target the conduct of specific firms, a market inquiry examines general market features and dynamics.

The Commission may initiate a market inquiry of its own accord if it has reason to believe that any feature or combination of features of a market impedes, distorts, or restricts competition. In deciding whether there is an adverse effect on competition, the Commission is specifically required to have regard to the impact on small and medium businesses (SMMEs), or firms controlled or owned by historically disadvantaged persons (HDPs). An HDP is, inter alia, a person that forms part of a category of individuals who, before the Constitution of the Republic of South Africa, 1993 came into operation, were disadvantaged by unfair discrimination on the basis of race.

The remedies available to the Commission following a market inquiry are notably broad. The Commission may take action to remedy, mitigate or prevent the adverse effect on competition, which may include a recommendation to the Competition Tribunal to may make an appropriate order in relation thereto. On the basis of information obtained during a market inquiry, the Commission may also: (a) initiate a complaint and enter into a consent order with any respondent, with or without conducting any further investigation; (b) initiate a complaint against any firm for further investigation; (c) initiate and refer a complaint directly to the Competition Tribunal without further investigation; (d) take any other action within its powers recommended in the report; or (e) take no further action. Determinations may be appealed to the Competition Tribunal.

The franschise sector market inquiry

The Commission is intending to investigate whether there are any features in the franchise sector that could impede, distort, or restrict competition, with a particular focus on the impact of franchise arrangements on SMMEs and HDPs. The Commission is concerned that existing franchise arrangements have excluded SMEs and firms owned by HDPs from the market and that franchisees are subjected to restrictive and exploitative practices by franchisors.

The inquiry will focus on three broad themes:

1. Finance, funding, and terms and conditions – assessing the requirements set by creditors and/or franchisors for SMEs and HDPs to access franchise finance, including the impact of onerous upfront capital contributions (typically 50% of total investment in unencumbered funds).
2. Franchise agreements' terms and conditions and practices – examining the nature of franchise terms and their impact on competition, including restrictive supply requirements, failure to pass on supplier discounts and rebates, non-negotiable pricing and promotional strategies, and burdensome or discriminatory franchise fee and royalty arrangements.

3. Exploitation of information asymmetries – assessing the extent to which franchisors may be distorting the true value of their franchise outlets and the impact on SME and HDP franchise business owners.

The inquiry may focus on sectors including fast food, construction, automotive, grocery, fuel stations (specifically the grocery and fast-food outlets within fuel stations), and health and beauty.